Andrew Grice: The Week In Politics

Blair's forgotten reforms are coming back to haunt him

"There must be a better way of doing it than this," Tony Blair sighed after tapping up rich people for donations to Labour at a schmooze arranged by Lord Levy, the party's chief fundraiser.

The event which made Mr Blair feel grubby occurred before the "cash for honours" controversy erupted in March. Since becoming Labour leader 12 years ago yesterday, raising money has been the part of the job he has hated most.

It is a fair bet that he hates it even more now that the Metropolitan Police investigation into whether Labour traded loans for peerages threatens to cut short his tenure in Downing Street.

The first section of Labour's 1997 election manifesto was headed: "A new politics." One of its 10 specific pledges was: "We will clean up politics, decentralise political power throughout the United Kingdom and put the funding of political parties on a proper and accountable basis."

Over the years, senior aides have urged Mr Blair to grasp the nettle on party funding by introducing a greater element of taxpayers' support so that, as membership dwindled, they did not become dependent on a handful of rich donors. But he judged asking taxpayers to fund parties too hot to handle without the support of the Conservatives.

Other aides urged him to reform fully the House of Lords. Again, it was not rated a priority. Plans for a mainly elected second chamber were allowed to run into the sand in a messy series of Commons votes three years ago.

How Mr Blair must now wish that he had listened to his advisers. If he had reformed party funding, and the Lords, he would not have to spend his summer holiday worrying about what to tell the police when they question him on his return.

It remains to be seen whether the Crown Prosecution Service authorises any charges. But senior Labour figures no longer pooh-pooh the prospect, as they did at the outset. They are very jittery.

Even if no charges are brought, the inquiry has already inflicted grave damage, and looks as though it will do more. The arrest of Lord Levy, who denies any wrongdoing, and the expected questioning of the Prime Minister, could become lasting symbols of the Blair era. Hardly the sort of legacy he has in mind.

Mr Blair has failed to "clean up politics". There was another example yesterday when the Commons Standards and Privileges Committee, in its report on John Prescott, called for independent supervision of the code of conduct for ministers, on which Mr Blair is judge and jury.

He grudgingly appointed an adviser on the code after the Tessa Jowell controversy but has yet to refer a case to him. Again, Mr Blair makes himself look like a chancer trying to get away with it.

There is a way out of the morass on party funding. The Tories have changed their tune and are ready to accept more state cash. They already do very nicely out of it, receiving £4m in Short money - cash due to opposition that operate in Parliament - last year as the official Opposition. Such support is likely to be extended to the governing party after a review chaired by Sir Hayden Phillips, a former Whitehall mandarin.

He is trying to find an all-party consensus, but it won't be easy. Both the Tories and Labour spent more than £15m on "campaigns" last year, and agree that the crazy "arms race" between them at elections must be halted. So there will be a tighter limit on election spending, and high-profile advertising will be a thing of the past.

The Tories' proposal for a £50,000 ceiling on individual donations looks fine at first glance but would not provide a level playing field since they have more supporters willing to give that amount than Labour. It would also sever Labour's lifeline from the trade unions, who say their annual party contributions would fall from £8m to £800,000. There is also evidence from the US that parties find ways round such ceilings, just as they did here by using loans to bypass disclosure rules on donations.

Labour is in a hurry. It paid a staggering £436,000 in interest charges on its controversial loans last year. Its National Executive Committee (NEC) was told this week that party members are shunning appeals for money. No wonder. And most big donors have understandably been put off by recent events.

Legislation has been pencilled in for the next parliamentary session starting in November, even though the Phillips inquiry is not expected to report until the end of the year. Although Labour desperately needs the money, there is a problem in rushing ahead too swiftly.

Mr Blair is now the wrong man to "clean up politics". His image is tainted and, rightly or wrongly, the voters will suspect he is acting out of self-interest rather than in the public interest.

The right man will be the Prime Minister's successor. I am sure that Gordon Brown, the most likely one, already has plenty of ideas in his bottom drawer labelled "restoring trust in politics". The Chancellor recognised the problem two years ago, when he said: "We have not done enough to respond to the yearning in 1997 not just for different government but for a different way of governing, not just for different policies but for a different politics."

The changes needed to spring-clean our politics would have much more impact if they were part of a fresh start.

As one gloomy minister told me: "If we don't change the culture, the voters will change the Government."

grice@independent.co.uk